Telcos eye Asia in plan for new internet cable

Telecom, Telstra and Vodafone agree to work together on Auckland-to-Sydney link.

If the project goes ahead it would be New Zealand's second international connection, running alongside the Southern Cross Cable system. Photo / Getty Images

A consortium of telcos has its eye on Asia rather than the United States as they unveil a plan for a new submarine internet cable between Auckland and Sydney.

Telecom, Telstra and Vodafone announced a memorandum of understanding yesterday for a new link between New Zealand and Australia called the Tasman Global Access.

If the project goes ahead it would be New Zealand's second international connection, running alongside the Southern Cross Cable system, which Telecom has a 50 per cent interest in and which connects to Australia and the United States.

Telecom chief executive Simon Moutter said the planned cable would provide "important redundancy", protecting New Zealand's internet connection to the rest of the world if there was a fault on the existing pipe.

"It will also enable New Zealand to tap into the much broader international cable connectivity that Australia already enjoys ... it makes good business and economic sense for NZ to leverage these existing cable networks at a fraction of the cost of a new cable directly across the Pacific or into Asia.

"Australia also enjoys good connectivity with Asia, which is achieving strong internet traffic growth in line with the economic shift thatwe hear so much about," Moutter said.

While other proposed cable projects - such as the failed Pacific Fibre project connecting Auckland, Sydney and Los Angeles - were aimed at hooking up to the United States, Moutter said this venture was going in "the other direction".

"Remember their proposal was US cables. We're going a little bit with the trend, which is that internet traffic is shifting towards Asia. So we're looking at a cable network that's going in the other direction. I think today Southern Cross network will easily handle the foreseeable future on the US stuff."

Moutter said the three partners in the project were likely to have equal shareholdings, but this was not set in stone.

Responding to questions about how this would affect retail customers, he said international capacity was not a "material factor in the pricing of retail broadband today".

InternetNZ policy lead Susan Chalmers did not expect that the cable would result in a "breakthrough" in the pricing of transporting international traffic.

"What it will mean for end users in New Zealand is likely by connecting in Australia we'll have more speedy delivery of content to New Zealand because content is moving closer and there are a bunch of new content distribution networks that have popped up in Australia."

Small firms raise monopoly concerns

Slingshot chief executive Mark Callander said a planned transtasman cable venture could create "an unlevel playing field" and that his company might go to the Commerce Commission if that was the case.

Asked for his comments on a new international cable proposed by Telecom, Vodafone and Telstra yesterday, Callander replied: "It certainly creates some concerns from our perspective. Obviously, when two monopolies get together to work together on something like this it creates competition concerns."

The internet company boss said he was still waiting for more details but that his firm would have to take steps to ensure its worries were "at least considered or consulted" on.

"We need to wait and see what the full details are ... there's a range of options for consideration once we have a bit more information."

Telecommunications Users Association head Paul Brislen said competition questions hung over the project. This was because Telecom had a 50 per cent stake in Southern Cross, New Zealand's only existing international internet link.

Mark Petrie, chief executive of Christchurch-based internet retailer Snap, said the new cable probably would not bring the level of competition that the country needed.

"I think that would be better served by having an independent owner of the cable that isn't a retail player in New Zealand." he said.

Telecom boss Simon Moutter did not believe the venture would present New Zealand with competition issues.

Vodafone chief executive Russell Stanners said: "You need two people in the market to be competitive, we'll be two players in the market so this will be a competitive alternative."

According to a Telecom representative the model being considered for the cable would see the capacity on it divided up between the shareholders rather than being sold directly to other retail internet providers.